Alibaba legend returns: why did the stock price dip?

Alibaba’s head honchos: what is the leadership change?

Alibaba’s recent leadership reshuffle includes changes to two top positions. Co-founder Joseph Tsai will assume the role of Chairman of the Board, replacing Zhang Yong after his four-year tenure. Eddie Wu, former Chairman of Taotian Group, has been appointed as CEO.

Notably, the two newly appointed leaders share a common background – they have been working alongside Jack Ma for decades. Joseph Tsai has been working closely with Jack Ma since the establishment of Alibaba Group in a Hangzhou apartment in 1999.

Eddie Wu, with a background in computer engineering, played a a pivotal role in assisting Jack Ma in setting up Alipay.

In addition to these significant leadership changes, there was an unusual endorsement from Jack Ma himself for this shake-up. Following the announcement, the "retired" Ma held meetings with the heads of all business units within Taotian Group, emphasizing that the approaches that led to Alibaba's past success may no longer be relevant.

He then outlined three key directions for the Chinese tech giant: a renewed focus on e-commerce, a customer-centric approach, and a recommitment to the internet.

Alibaba’s stock price: why didn’t investors welcome the leadership change?

Alibaba's stock price plunged following the announcement, which sharply contrasted with the 15% surge witnessed three months ago when Alibaba unveiled its division restructuring. Why did investors not welcome the change this time?

If we delve deeper into these ostensibly unexpected changes, a key message emerges: the protracted era of policy uncertainties from Chinese government that has afflicted the technology sector over the past three years has now reached a conclusive juncture.

Jack Ma has remained low-key and almost disappeared from the public eye since the Chinese government began cracking down on the tech industry in 2020, refraining from making high-profile remarks about Alibaba's future direction.

Additionally, the fact the new leadership consists of Ma's allies indicates that the turbulence caused by Ma have temporarily subsided. In 2020, Jack Ma criticized the "outdated supervision" of Chinese financial regulation in a public event. His speech ultimately led to the withdrawal of the Ant Group's IPO, which was projected to raise US$34.5 billion as the world's largest IPO at the time.

However, can the trauma inflicted upon the tech industrym – especially Alibaba – during the past three years truly be reversed by the return of Ma's team? The reflection in Alibaba's stock price indeed demonstrates investors' uncertainties regarding this question.

Firstly, the overall economic environment in China has undergone significant changes in the past three years. Ma's emphasis on "returning to e-commerce, returning to users" directly targets China's domestic consumer market, which happens to be the most criticized area in China's economic recovery journey this year.

In the short term, it remains unknown how long it will take for domestic consumer confidence and demand to truly recover from the unprecedented disruption caused by the years-long pandemic and harsh resctritions. In the long term, the steep decline in population growth is an unfortuate new reality that companies targeting the mass consumer market must face.

More importanly, it seems investors are seeking "new" changes. The market’s responses during the two major organizational changes highlight that investors are eagerly anticipating a forward-looking transformation rather than a mere "return to past glory".

In conclusion, the return of Tsai and Ma does indeed mark a new phase for Alibaba. However, the path they face is no easier than when the company was founded 30 years ago.

Alibaba stock price technical analysis

After Alibaba's stock price failed to retest the 100-day moving average, the hope for a double-bottom rebound is likely to diminish. Currently, the key support level consists of the 50-day moving average and the upward trend line since June. As a result, the $86 level deserves great attention. If price continues to decline below this level, there is a rising chance for it to retest the 20-day moving average and potentially even forming a double-top pattern. In such a scenario, investors should exercise more caution and establish appropriate stop-loss points.